Kim Stephenson, an occupational psychologist from the UK is one of those people. Here’s a summary of a conversation we’ve been having on decision-making, happiness, emotions, government policy and more:

You used to be a financial adviser before you went back to school to learn occupational psychology. Why?

You don’t get paid (as an adviser) to understand people, help them get what they truly want, help them be happy. You get paid to show them how to have more money and keep what they’ve got.

And then I did some work with two laid-off guys: mid-forties, both had the same job for the last 25 years, married with two kids, both got the same severance package. My training said: same life stage, same situation, same advice. But, one said getting laid off was the best thing that had happened and knew what to he wanted to do next. The other kept asking what could he do? I tried to help, but I didn’t really have the skill set. I couldn’t carry on doing stuff that didn’t really help people after that.

I work from the research on happiness psychology. Having a purpose, doing something that fits with your values, pursuing things that you have an aptitude for and that you enjoy make most people happy. Many people go into professional careers because they see them as well paid and they feel it’s expected of them. But their heart is not in it. It’s unlikely they’ll fulfill their potential. So they become a third-rate accountant, rather than a first-rate, say, artist. They might–or might not–make more money. But they’ll spend their lives doing something they hate. They could instead do something they actually enjoy all the time (well, most of the time!) and be able to look back on their career and feel satisfied that they’ve achieved something meaningful to themselves.

What behavioral issues get in the way of wise decisions?

That kind of assumes we know what a “wise” decision is. Everybody says, “you should save.” But the savings behavior you need is unique to you – it’s to get you from where you are, to where you want to be. The problem is: people will tell you facile things like “if you save, you’ll be glad in forty years you did”, when they have no idea what you want to do in the next forty years. So the big behavioral issue is people tend to take the line of least resistance (give in to pressure, facile drivel or just do what they fancy doing – save, spend, whatever) without thinking where they want to get to (values, purpose, vision, goals etc.) and where they are now (context, their personality, likes and dislikes etc.) and plotting some sort of journey to get from one to the other via all the fun stuff you talked about in your article.

To make a wise decision, you need to find out about yourself first.

How do you coach people to better decision-making skills?

I like to start with a psychometric indicator by Hogan with some people. It doesn’t say “intuition is better” or “logical analysis is better” it just looks at what you do and how you analyze data.

I often hear business people saying “I make logical decisions” and they don’t. Example, insurance underwriters, they assume they are totally actuarial – but most of the underwriters make intuitive decisions on rating risk – and they’re usually better than the actuarial model. In other cases, such as in investments, people rely on flawed models so they’d actually have been better off with gut instinct. So, I teach people reality, looking at their process and comparing it to the environment to see if it matches well. If not, I help them figure out how to make a better fit.

You’ve said that all decisions are emotional. What do you mean? Is this a human design flaw or feature?

It’s neither a flaw nor a feature; it’s the way it is.

One problem with finance, decision theory etc. is that people assume there must be a right answer.

The thing with emotion is that the brain is complex – unbelievably so. People glibly talk about “emotion” and “cognition” as if they are discrete features, but try actually defining them, or locating them physically in the brain…

What we do know is that by the time we “think” and make a conscious, deliberative decision, the data we use have gone through lots of other bits of the brain, their significance has been assessed, their connections to our past have been assessed, the surroundings have been scanned. So you can make a “gut feeling” decision, that is in fact based on a lot of cognitive perceptions, and you can make a deliberative decision that is based on a lot of emotionally tainted data. Either way, it’s got an emotional component somewhere (if only we knew exactly what emotion was!)

Do you think nudges and other low cost behavioral interventions distract from the harder and more expensive task of educating people to make better decisions?

I think nudges a good idea as long as they are “in addition to”, rather than “instead of.” Nudges assume that there’s a right answer that works for everybody, in all situations. Trouble is, nobody (including the people designing the nudge) knows what the individual affected by the nudge wants or how they feel in their actual situation, so the nudge might be the worst thing to do in reality. So you’re taking a big responsibility as a nudger, and is it wise to trust a government to make those decisions fairly, in your best interests? That said, probably better a government, which at least pretends to care, than a commercial organization that doesn’t. But I’d still rather see some realism and governments focusing on education.

You encourage a pretty deep skepticism of professional advice. Should we be skeptical of your advice as well?

Yes! I tell my students to compare what I say with what common sense tells you. Look at actual expertise and experience. And look at what vested interests there are. My claim is that people are complicated and important and money is simple and trivial.

Yet, most investment “experts” say that money is really complicated so you need them to understand it and money is vital (they don’t talk about people). Well, the human brain is the most complex single entity in the known universe. In contrast, money is all alike, makes no irrational decisions, buys nothing on impulse, never does something and then says, “Why did I do that, I know it always goes wrong.”

I suppose my vested interests are to sell books and consultancy but I’m not sure that is quite in the same league as what most of the finance “experts” are selling, which often has no benefit and costs, say, 1.5% of funds under management each year.